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 November 11, 2015 - 4:05 PM EST
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Aveda Transportation and Energy Services Announces Results for the Third Quarter of 2015

CALGARY, AB--(Marketwired - November 11, 2015) - Aveda Transportation and Energy Services Inc. ("Aveda" or the "Company") (TSX VENTURE: AVE), a leading provider of oilfield hauling services and equipment rentals to the energy industry, today announced results for the nine months ended September 30, 2015.

2015 THIRD QUARTER BUSINESS HIGHLIGHTS

  • As a result of the significant slow-down in drilling activity experienced in the oil and gas sector due to the drastic decline in the price of oil and natural gas, revenue for the three months ended September 30, 2015 decreased by $18.4 million to $24.1 million, compared with revenue of $42.5 million for the same period in 2014. US revenue decreased by 41.5% while Canadian revenue decreased by 51.1% which resulted in an overall revenue decrease of 43.3%;
  • Generated net loss for the three months ended September 30, 2015 of $20.1 million, compared to net loss of $0.4 million for the same period in 2014. Loss per share was $1.05 compared to $0.02 in the comparative period. Onetime items related to the Hodges Trucking Company, L.L.C. acquisition (the "Acquisition") had a negative impact on third quarter 2015 earnings of approximately $1.3 million and due to the industry condition, the Company had intangible assets and goodwill impairment of $14.4 million ($0.82 per share), after tax impairment of $10.4 million ($0.55 per share). Excluding the onetime items related to the Acquisition and impairment, the Company would have generated an operating loss of $8.4 million ($0.44 per share) in the third quarter of 2015;
  • Generated Adjusted EBITDA1 loss for the quarter ended September 30, 2015 of $6.6 million, compared with Adjusted EBITDA1 of $5.2 million for the same period in 2014;
  • The Company ended the quarter with $35.8 million of outstanding loans and borrowings on its senior secured debt, the lowest amount outstanding in the previous 12 months;
  • The Company ended the quarter with $15.0 million in working capital with a working capital ratio of 2.20; and
  • The Company implemented various cost management initiatives, including the elimination of 51 administrative and non-revenue generating positions in the field, including, corporate positions in Calgary and Houston. In addition, Aveda closed its branch in Mineral Wells, TX and also merged its Cherokee, OK branch with its Oklahoma City, OK branch. Aveda expects that it will generate operational savings of approximately $5.0 million annually as a result of the cost cuts.

2015 FIRST THREE QUARTERS' BUSINESS HIGHLIGHTS

  • Revenue for the nine months ended September 30, 2015 declined by $26.2 million to $83.8 million, compared with revenue of $110.0 million for the same period in 2014. US revenue decreased by 14.4% and Canadian revenue decreased by 57.7% which resulted in an overall revenue decrease of 23.9%;
  • Generated net loss for the nine months ended September 30, 2015 of $15.4 million, compared to net income of $1.8 million for the same period in 2014. Loss per share was $0.80 compared to earnings per share of $0.10 in the comparative period. Onetime items related to the Acquisition had a positive impact on 2015 earnings of approximately $9.8 million and intangible assets and goodwill impairment had a negative impact on earnings of $14.4 million, after tax impairment of $10.4 million (combined after tax onetime items had negative impact of $0.03 per share). Excluding the onetime items related to the Acquisition and impairment, the Company would have generated an operating loss of $14.8 million ($0.77 per share);
  • Generated Adjusted EBITDA1 loss for the nine months ended September 30, 2015 of $4.4 million, a decrease of $20.6 million compared with positive Adjusted EBITDA1 of $16.2 million for the same period in 2014;
  • Completed the Acquisition for total consideration of US$42.0 million, the Company acquired approximately 900 pieces of rig moving and heavy haul equipment. US$15.0 million of the purchase price was financed through the Company's existing senior credit facility, and US$27.0 million was financed by a seller take-back note (the "Note"). The Note is a five-year term debt note with no requirement for early principal payment;
  • Subsequent to the closing of the Acquisition, the Company sold approximately 350 pieces of Hodges' non-oilfield equipment for approximately US$22.0 million. The Company received US$20.8 million of the sale price in cash and US$1.25 million was placed in escrow. Aveda received US$0.25 million from the escrow during the third quarter of 2015. The balance of the escrow amount of US$1.0 million was received by Aveda in the fourth quarter of 2015; and
  • The Company has implemented wage roll backs across the organization to reduce costs.

"The current operating environment is challenging and difficult to navigate. We have successfully implemented various cost reductions which we expect will show in our fourth quarter results," said David Werklund, Executive Chairman and Interim President and Chief Executive Officer of Aveda. "We are also seeing the benefits of our size and geographic footprint as we are being awarded various new contracts which should allow us to improve our results in 2016."

The Company will host its third quarter fiscal 2015 results conference call on Thursday, November 12, 2015 at 9:00 a.m. Eastern Time (ET). Executive Chairman and Interim President and Chief Executive Officer David Werklund and Vice-President, Finance and CFO Bharat Mahajan will discuss Aveda's financial results for the quarter and then take questions from securities analysts.

To access the conference call by telephone, dial (647) 427-7450 or 1-888-231-8191. A live audio webcast of the conference call will be available at http://event.on24.com/r.htm?e=1087715&s=1&k=254A260A4FBEDA00D244E297A3A5EC1C.

The conference call webcast will be archived and available at http://www.avedaenergy.com/investors/Conference-Calls/default.aspx until December 31, 2015.

The Company's consolidated financial statements and Management's Discussion and Analysis are available on the Company's website at www.avedaenergy.com or the SEDAR website at www.sedar.com.

Financial Overview

(in thousands, except per share and ratio amounts)

   
  Nine  Nine     Three  Three     
  Months  Months     Months  Months     
  Ended  Ended  % Change
 Ended  Ended  % Change
 
  September  September  2014 -
 September  September  2014 -  
  30, 2015  30, 2014  2015  30, 2015  30, 2014 2015
 
Revenue 83,770  110,007  -23.9 %24,113  42,497  -43.3 %
Gross profit5 (4,774 )18,889  -125.3 %(6,373 )5,292  -220.4 %
Gross margin -5.7 %17.2 %N/A  -26.4 %12.5 %N/A  
Gross profit5 excluding depreciation and amortization 9,615  29,941  -67.9 %(991 )10,163  -109.8 %
Gross margin excluding depreciation and amortization 11.5 %27.2 %N/A  -4.1 %23.9 %N/A  
Adjusted EBITDA1 (4,439 )16,198  -127.4 %(6,648 )5,213  -227.5 %
Adjusted EBITDA1 as a percentage of                   
revenue -5.3 %14.7 %N/A  -27.6 %12.3 %N/A  
Net income (loss) (15,370 )1,812  -948.2 %(20,121 )(398 )-4955.5 %
Net income (loss) as a percentage of revenue -18.3 %1.6 %N/A  -83.4 %-0.9 %N/A  
Adjusted EBITDA1 per share (0.23 )0.85  -127.1 %(0.35 )0.26  -234.6 %
Earnings per share - basic (0.80 )0.10  -900.0 %(1.05 )(0.02 )-5150.0 %
Earnings per share - diluted (0.80 )0.09  -988.9 %(1.05 )(0.02 )-5150.0 %
Current ratio2 2.20  1.63  35.0 %2.20  1.63  35.0 %
Debt to equity ratio3 1.09  0.86  26.7 %1.09  0.86  26.7 %
Debt to EBITDA ratio3, 4 18.23  3.06  495.8 %18.23  3.06  495.8 %
             

Outlook

Aveda earns revenue primarily by providing specialized transportation services to companies engaged in the exploration, development and production of petroleum resources. As a result, demand for Aveda's transportation services is generally linked to the economic conditions of the energy industry and the level of drilling activity in the WCSB and US.

Many industry experts have varying opinions on when oil and natural gas prices will start to rebound; however, the general consensus seems to suggest that the environment will remain challenging through the remainder of 2015, and most, if not all, of 2016. In response to the current environment, Aveda has taken aggressive measures to right-size its costs, including:

  • Partially consolidating its Houston corporate office into Calgary;
  • Consolidation of select terminal locations, including Cherokee, OK into Oklahoma City, OK and Mineral Wells, TX into Marshall, TX;
  • Eliminating 51 administrative and non-revenue generating positions;
  • Implementing multiple wage rollbacks at the corporate and field level, the initial adjustment made in second quarter of 2015;
  • Restructuring US corporate benefits from a matching program to a monthly contribution maximum; and
  • Evaluating other cost reduction measures such as converting selective salaried positions to a day rate/variable wage.

As part of the corporate office consolidation, Kevin Roycraft has left the company. In the interim, David Werklund, Executive Chairman, has stepped in as CEO as the Board searches for a permanent replacement. Mr. Werklund, as Founder and former CEO of Tervita (previously called CCS Corporation), brings to Aveda extensive experience in successfully leading companies through industry downturns. Under Mr. Werklund's leadership, Aveda will continue to actively explore additional cost cutting strategies. In addition, Aveda is exploring potential partnerships with like-minded operators who are willing to offer more favorable pricing in exchange for Aveda's industry leading efficiency and safety record. Despite the aggressive cost cutting measures taken by Aveda, it is likely that the fourth quarter of 2015 will be EBITDA negative.

Although the current environment is challenging, it presents significant opportunity for Aveda. Due to the fragmented industry in which Aveda competes, and significant pricing pressure being experience by all rig movers, many regional competitors are struggling to finance operations. As such, Aveda is being presented with an increasing number of potential acquisition opportunities, both in Canada and the US. Aveda anticipates that its market share will continue to increase through a combination of strategic acquisitions and competitors exiting the market. Aveda is also experiencing an increase in Requests for Proposals ("RFPs") from large oil and gas companies looking to consolidate and simplify their supply chain. This has generally been positive for Aveda due to its broad geographical reach and size of fleet, making it one of the few rig moving companies in North America truly capable of servicing all, or the majority, of these larger company's rig moving needs. Due to the administrative cost savings of consolidating vendors, pricing for these RFPs are generally more favorable. To date, Aveda has won several of these contracts which should have a positive impact on future performance. Aveda will provide additional information on customer activity in the fourth quarter 2015 MD&A.

Aveda is estimating a 2015 capital expenditure of between $1.2 and $1.5 million (excluding acquisitions). At this time, 2016 capital expenditure is estimated to be between $2.5 and $4 million (excluding acquisitions).

Overall, Aveda expects the remainder of 2015, through to 2016, to be an operational challenge. While Aveda is facing uncertainty over the short term, long-term prospects remain strong. With a flexible and talented workforce, and the largest fleet in the industry, Aveda expects to emerge from the downturn stronger, and more profitable.

About Aveda Transportation and Energy Services

Aveda provides specialized transportation services and equipment required for the exploration, development and production of petroleum resources in the Western Canadian Sedimentary Basin and in the United States of America principally in and around the states of Texas, Pennsylvania, Oklahoma and North Dakota. Transportation services include both the equipment necessary to move the load as well as a trained, professional driver capable of securing, moving and manipulating the load at its origin and destination. Aveda's rental operations include the rental of well-sites, tanks, mats, pickers, light towers and other equipment necessary for oilfield operations.

Aveda was incorporated in 1994 as a private company to serve the oil and gas industry. In the spring of 2006 the Company went public on the TSX Venture Exchange. Aveda has major operations in Calgary, AB, Leduc, AB, Sylvan Lake, AB, Edson, AB, Pleasanton, TX, Midland, TX, Marshall, TX, Williamsport, PA, Buckhannon, WV, Williston, ND, and Oklahoma City, OK. Aveda is publicly traded on the TSX Venture Exchange under the symbol AVE. For more information on Aveda please visit www.avedaenergy.com.

This News Release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "could", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will", "project", "should" or similar words, including negatives thereof, suggesting future outcomes. In particular, this News Release contains forward-looking statements relating to: demand for the Company's services and general industry activity level; the Company's growth opportunities; and expectations regarding the Company's revenue, EBITDA and equipment utilization. Aveda believes the expectations reflected in such forward-looking statements are reasonable as of the date hereof but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.

Various material factors and assumptions are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements. Those material factors and assumptions are based on information currently available to Aveda, including information obtained from third party industry analysts and other third party sources. In some instances, material assumptions and material factors are presented elsewhere in this News Release in connection with the forward-looking statements. Readers are cautioned that the following list of material factors and assumptions is not exhaustive. Specific material factors and assumptions include, but are not limited to:

  • the performance of Aveda's businesses, including current business and economic trends;
  • oil and natural gas commodity prices and production levels;
  • the effect of the rebranding on Aveda's businesses;
  • capital expenditure programs and other expenditures by Aveda and its customers:
  • the ability of Aveda to retain and hire qualified personnel;
  • the ability of Aveda to obtain parts, consumables, equipment, technology, and supplies in a timely manner to carry out its activities;
  • the ability of Aveda to maintain good working relationships with key suppliers;
  • the ability of Aveda to market its services successfully to existing and new customers;
  • the ability of Aveda to obtain timely financing on acceptable terms;
  • currency exchange and interest rates;
  • risks associated with foreign operations;
  • changes under governmental regulatory regimes and tax, environmental and other laws in Canada and the United States; and
  • a stable competitive environment.

The forward-looking statements regarding Aveda's potential revenue and EBITDA are included herein to provide readers with an understanding of Aveda's anticipated cash flow and Aveda's ability to fund its expenditures based on the assumptions described herein. Readers are cautioned that this information may not be appropriate for other purposes.

Forward-looking statements are not a guarantee of future performance and involve a number of risks and uncertainties, some of which are described herein. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause Aveda's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks identified in Aveda's annual information form and management discussion and analysis for the year ended December 31, 2014 (the "MD&A"), which are available for viewing on SEDAR at www.sedar.com. Any forward-looking statements are made as of the date hereof and, except as required by law, Aveda assumes no obligation to publicly update or revise such statements to reflect new information, subsequent or otherwise.

This News Release contains the terms "EBITDA" and "Adjusted EBITDA" which are defined in the MD&A. EBITDA and Adjusted EBITDA as presented do not have any standardized meanings prescribed by international financial reporting standards ("IFRS") and therefore may not be comparable with the calculation of similar measures for other entities. Management uses Adjusted EBITDA to analyze the operating performance of the business. Adjusted EBITDA as presented is not intended to represent cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS.

This News Release contains the terms "cash flow", "working capital" and "working capital ratio", which do not have any standardized meanings prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. As an indicator of the Company's performance, cash flow should not be considered as an alternative to, or more meaningful than, net cash from operating activities as determined in accordance with IFRS. The Company considers cash flow to be a key measure as it demonstrates the Company's underlying ability to generate the cash necessary to fund operations and support activities related to its major assets. Cash flow is determined by adding back changes in non-cash operating working capital to cash from operating activities. Management calculates working capital as current assets less current liabilities and uses this measure to analyze operating performance and leverage.

Notes:

(1) This News Release contains the term Adjusted EBITDA. Adjusted EBITDA as presented does not have any standardized meaning prescribed by international financial reporting standards (IFRS) and therefore it may not be comparable with the calculation of similar measures for other entities. Management uses Adjusted EBITDA to analyze the operating performance of the business. Adjusted EBITDA as presented is not intended to represent cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS. It is defined as earnings before interest, taxes, depreciation and amortization excluding foreign exchange gains or losses which are primarily related to the US dollar activities of the Company and can vary significantly depending on exchange rate fluctuations, which are beyond the control of the Company, and write downs of intangible assets, goodwill impairment, financing costs, gains or losses on disposal of assets, stock based compensation, fees and expenses on settlement of debt and losses on extinguishment of debt.

(2) Current ratio calculated as current assets divided by current liabilities.

(3) Debt includes loans and borrowings as per their carrying amounts on the balance sheet.

(4) EBITDA used is Adjusted EBITDA for the trailing twelve months.

(5) Gross profit calculated as revenue less direct operating expense.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

For more information, please contact:
Bharat Mahajan, CA
Vice President, Finance and Chief Financial Officer
(403) 264-5769
bharat.mahajan@avedaenergy.com


Source: Marketwired (Canada) (November 11, 2015 - 4:05 PM EST)

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